🔄 What Is a Sublease Agreement in Real Estate?

A Sublease Agreement is a legal contract where the original tenant (the “sublessor”) rents out all or part of the rental property to another tenant (the “sublessee”), while still being responsible for the original lease with the landlord.

📌 When and Why It’s Used in Real Estate

Sublease agreements are typically used when:

• The original tenant needs to vacate the property temporarily before their lease ends.
  
• A tenant wants to offset rental costs by sharing the space.
  
• Property owners allow flexible rental structures in multifamily or shared housing situations.
  

This strategy allows the original tenant to remain compliant with their lease while transferring daily occupancy to someone else.

🧮 How It’s Calculated or Applied

Sublease agreements generally don’t involve complex formulas, but investors should evaluate whether the sublease income covers or exceeds the original rent, especially in house-hacking scenarios.

Here’s a simplified income analysis formula:

Example: If you rent a unit for $1,200/month and sublease a room for $800, your net cost drops to $400, excluding utilities and fees.

✅ Pros

• Reduces financial burden for tenants
  
• Can create short-term cash flow for tenants or house hackers
  
• Increases property occupancy for landlords (if permitted)
  

⚠️ Cons

• Can lead to legal issues if not allowed by the original lease
  
• May reduce landlord control over who occupies the unit
  
• Sublessees may be less accountable than direct tenants
  
• Requires clear documentation to avoid misunderstandings